Alan Krueger of Princeton asks, in today's New York Times, about the problem for the reconstruction of Iraq of its massive debt.

Even if it did not sow the decay of the whole civilized life of Europe," an ominously prescient John Maynard Keynes wrote in 1919, it was "abhorrent and detestable" to impose financial reparations on Germany after World War I. . . . Even without punitive war reparations, the financial burden on Iraq already poses a big obstacle to reconstruction. The fog of finance is almost as thick as the fog of war in Iraq, but analysts have pieced together a balance sheet that looks, well, wildly out of balance. . . . Iraq's total potential obligation — from war-related compensation claims, foreign debt and pending contracts — is $383 billion . . . To gain some perspective on the crushing financial burden facing the Iraqi people, note that with a population of 24 million, pending obligations work out to $16,000 for every man, woman and child. The Central Intelligence Agency estimates, probably optimistically, that Iraq's per capita gross domestic product is $2,500. So, for the average person, financial obligations exceed income by a ratio of more than six to one. . . . The ratio of debt to G.D.P. in Iraq is more than 10 times what it is in Argentina or Brazil.

Krueger is also keen on a proposal by Michael Kremer and Seema Jayachandran of Harvard for an international agency with the power to declare regimes odious and therefore declare debts they incur unenforceable. The paper addresses the problem of errors head on. The agency might refuse to declare an odious regime as such. They argue this is no worse than the present state of affairs. (I am not persuaded; the decision could make it harder for individual nations to act.) The agency might also declare a regime as odious when it is not. Their proposal is to hand over authority to something like the security council, where there is a veto power.

Ha ha ha:

" Daniel Ortega, leader of the Sandinista government that succeeded
Somoza, told the United Nations General Assembly that his government would repudiate Somoza’s
debt, but he reconsidered when his Cuban allies advised him that doing so would unwisely alienate
Nicaragua from Western capitalist countries."

Lynne Kiesling also mentioned this doctrine back in February in an informative posting on her blog:

http://knowledgeproblem.blogspot.com/2003_02_01_knowledgeproblem_archive.html#90319107

Jubileeiraq.org is a new campaign addressing this issue of Saddam's debts, and arguing that the Iraqi people have no obligation to pick up the bills for the loans which financed his oppression.

What would happen to Iraq's credit if it simply made no payments on this debt? Would it still be able to borrow any money?